UK's Inaccurate Inflation Measure Due for Change

In London, the UK Statistics Authority has launched a joint Consultation with HM Treasury, aimed at addressing the 'shortcomings' of the RPI (Retail Price Index) as a measure of inflation. The CPIH measure, which includes housing costs, is held up as a better indicator.

The Authority recommended to the Chancellor a year ago this month that the RPI's www.ons.gov.uk/economy/inflationandpriceindices/articles/shortcomingsoftheretailpricesindexasameasureofinflation/2018-03-08 shortcomings should be tackled with the addition / substitution of methods and data sources used in CPIH. Today's announcement means the Treasury will consult on the appropriate timing for the proposed changes, while the Authority will consult on the best way of making the changes. The consultation began on 11th March and runs until Wednesday 22nd April.

Sir David Norgrove (pictured), Chair of the body, says of the move: 'The role of the UK Statistics Authority is to promote and safeguard official statistics. I, my predecessors and successive National Statisticians have been clear that the RPI is not a good measure, at times significantly overestimating inflation and at other times underestimating it. However, the RPI is unique as we need consent from the Chancellor to make certain changes, such as the one we have proposed'.

'We are seeking feedback from the widest range of users on our proposed method of bringing the methods and data sources of our most comprehensive inflation measure, CPIH, to the RPI'.

Details of the consultation are here: https://consultations.ons.gov.uk/rpi/2020 .